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PepsiCo, Inc. (PEP), Oracle Corporation (ORCL): Donald Yacktman Still Bets on Big Consumer and Tech Stocks

Donald Yacktman‘s Yacktman Asset Management is one of the most widely-followed funds in the US due to its focus on value investing. Yacktman is known for his rather conservative approach that is very similar to Warren Buffett’s strategy. His equity portfolio is comprised mostly of large and mega-cap stocks that are among the largest and most popular across their industries. Yacktman Asset Management’s latest 13F revealed an equity portfolio valued at $24.12 billion, slightly higher over the quarter. The 13F portfolio contains a total of 50 long positions, mostly in consumer, technology and healthcare sector companies. The largest stakes are represented by PepsiCo, Inc. (NYSE:PEP), Procter & Gamble Co (NYSE:PG), and The Coca-Cola Co (NYSE:KO), which have been on the top for at least a year.

Donald Yacktman

Copyright: Insider Monkey

Even though Yacktman invests mainly in large- and mega-cap stocks, as part of our research, we are more interested in his small-cap picks. Through extensive backtests, we determined that imitating a portfolio of the 15 most popular small-cap picks among investors can generate around one percentage point in excess of the S&P 500 Total Return Index’s monthly return on average. Moreover, these picks generated an alpha of around 80 basis points per month. By comparison, the 50 most popular stocks among hedge funds overall (which are mostly large- and mega-cap companies) had a monthly alpha of six basis points, but underperformed the market by around seven basis points per month. This strategy had a return of around 138% in the last 2.5 years since we started following it in real time and beat the S&P 500 ETF (SPY) by over 80 percentage points (read more details here).

Yacktman owns shares of the two largest producers of soft drinks, PepsiCo, Inc. (NYSE:PEP) and The Coca-Cola Co (NYSE:KO), the stakes being the first and third largest in terms of value. In PepsiCo, Yacktman trimmed its stake by around 1.50 million shares to 25.49 million shares valued at $2.44 billion. The decline comes as PepsiCo, Inc. (NYSE:PEP)’s stock inched down by 1.8% during the first quarter. Moreover, for the first three months of 2015, PepsiCo posted a 3.2% annual decline in revenue to $12.22 billion, mainly affected by a stronger dollar. PepsiCo had been in the middle of a proxy contest with another investor, Nelson Peltz of Trian Partners, who had been trying to push for a separation of the company’s snacks segment. However, in January PepsiCo, Inc. (NYSE:PEP) agreed to appoint Trian’s adviser Bill Johnson to its board of directors, thus ending the proxy fight. Trian owns 17.87 million shares of the company as of the end of 2014. 

In The Coca-Cola Co (NYSE:KO), Yacktman also reduced its stake, by 5% on the quarter to 38.93 million shares worth $1.58 billion. Similar to PepsiCo, Coca Cola’s sales have put a negative stance on its revenue, which slightly missed expectations in the first quarter at $1.63 billion (down by 13% on the year). Moreover, The Coca-Cola Co (NYSE:KO)’s stock declined by more than 3% during the first quarter. Warren Buffett‘s Berkshire Hathaway is the largest shareholder of The Coca-Cola Co (NYSE:KO), owning 400.00 million shares according to its latest 13F filing.

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